Getting the Story Right

Now that I have returned from my UK trip, where I had the opportunity to present the main story of the Crash Course at the Parliament, at the London School of Economics, and to councillors and members of the Scottish Parliament, I've come away with an even stronger sense of the true dimensions of our predicament and what must be done.

We desperately need to start telling ourselves a new story, one that at least fits the known data, and we need to be far more urgent in our preparations for a future that is now upon us. This is not a US or a UK story, but one that applies equally to us all, no matter where we live. It is a global story.

A Bedtime Story

New home sales fell apart in January, tanking to their lowest levels in nearly 50 years. This is not surprising to me. The economy is not doing okay, is not in recovery, and is sliding down a slope of excessive debt and decades of overindulgence and structural imbalances that will take quite some time to repair. And that’s assuming there are no exogenous shocks from oil scarcity or other resource issues along the way.

Despite everything that has transpired to reveal the deep structural flaws in our economy and its main theories, few in the media and government seem to be able to grasp the concept that the story has changed and that all efforts to perpetuate ‘the story’ will only prolong the agony and make things worse.

Sales of newly built homes unexpectedly plummeted in January to their lowest level in nearly five decades, providing more evidence of the housing market's fragility.

Purchases of new single-family homes dropped 11.2 percent in January from December to a seasonally adjusted annual rate of 309,000, the Commerce Department reported Wednesday. Sales fell in every region except the Midwest, and the raw number of new homes on the market rose for the first time in nearly three years.

"No sugarcoating these numbers," Mike Larson, an analyst at Weiss Research, wrote in a note to clients. "They stink."

The figures are the latest in a string of mixed indicators about the housing market's health and renew questions about whether the federal government should follow through on its plans to soon end initiatives aimed at stimulating sales. Those efforts include a Federal Reserve program that helped pull down interest rates and a tax credit for first-time buyers and others.

It’s that last paragraph that gets me. The government has poured tens of billions of dollars into tax credits and loan modification programs in an attempt to coax more people to buy homes (or at least not vacate them), while the Federal Reserve has spent more than a trillion dollars buying up mortgages with the intent of driving down mortgage rates.

Of course, the lower the rate of interest, the more someone can afford to pay for a given house. The rule of thumb is that for every 1% change in mortgage interest rates, a roughly 10% change in the affordability of a house is registered. So the Fed mortgage buying program should really be named "the program to maintain house prices above what people can actually afford."

At this point, we might wonder if it is at all proper for the government/Fed to be responsible for controlling the housing market in this way. I say it’s not.

Further bad news slipped out in the market for existing houses, further underscoring the extent to which the housing tax credit probably did little more than accelerate a few purchases.

WASHINGTON (MarketWatch) - Resales of U.S. homes and condos fell 7.2% in January to a seasonally adjusted annual rate of 5.05 million, the lowest in seven months, and raising concerns about the durability of the housing recovery, the National Association of Realtors reported Friday.

Sales of existing homes have fallen two consecutive months after rising steadily through the fall on the back of a federal subsidy for first-time home buyers. The 16.2% decline in December was the largest on record; January's decline is the second largest since 1999, when the NAR began tracking consolidated sales of single-family homes and condos.

Not only is it clear that housing is not out of the woods, but also that whatever recovery there was came about largely because of the tax credit.

To see the official story on display, all one has to do is read practically any article about banking. In this one, where a sharp drop-off in bank lending is bemoaned, we see it on full display.

The decline in lending is a looming issue as the economy begins to recover. Companies start by returning to full capacity, filling open desks with new workers or running equipment more hours each day. But for the recovery to continue, for businesses to expand and employment to grow, lending must begin to expand, too.

Well, isn’t that just a fine systemic mess we’ve gotten ourselves into? In order for our economy to basically function at all, lending “must begin to expand, too.” We’ve bought into the collective story that money has to be loaned into existence, and the author of this piece is absolutely correct. Lending does have to expand, but the idea that there are other economic models where that is not the case is left out of that assessment.

Wouldn’t it be far better to have an economic model that could operate well, independently of whether it was expanding or even contracting?

This all gets down to whether we are pursuing the right story. I would guess that that one story line playing in the government/Fed goes like this:

“Housing is an important component of the economy that we’d like to see growing faster. Therefore, anything we can do to try and rescue housing is a good thing. If we fail to act, people will lose their homes, the economy will decline, and these things will be politically unpopular. Without credit expansion, our economy can't function. Even though low rates hurts savers and the prudent, it is more important that we artificially support credit expansion. Therefore our actions are warranted.”

I have some sympathy for this view and understand how it could ripple through the halls of power. It’s compelling, and it gives both politicians and bureaucrats the ability to exercise enormous power while looking like they are doing something.

However, I have a different story line, and it goes like this:

“The extreme run-up in housing prices was just a symptom of the largest, most ill-advised credit bubble in history, the impacts of which extend across nearly all asset classes. One effect of the credit bubble was that we lived well beyond our economic means for nearly two decades. To try and sustain that unsustainable condition with further borrowing and money printing is not only probably impossible, but it risks the complete destruction of our money itself. Worse, the larger story, that we are living well beyond the carrying capacity of the earth, is being utterly ignored.”

Those are very different stories. Where the governments around the world are attempting to return us to economic growth as fast as possible – any type of growth, they don’t care – I would be seeking to direct our energies in a far more focused fashion.

The most profound questions of all time are now, right at the surface, and we are wasting an opportunity to explore them. Questions such as, “How much is enough?” and, “What’s the role of the human on the planet as one of many organisms living within a complex environment?” are critical and demand significant attention.

Where Traditional Economists Have it Dead Wrong

What the Crash Course offers is a framework for understanding the larger world. You can drape past occurrences upon it, fit new happenings into it, and use it to make predictions about the future. So far, I think it offers both better explanatory and better predictive power than traditional economics, which means it is more useful to me.

I am now reading a fantastic book that has brought the reasons for that into even sharper focus. I am deeply impressed with both the author's mastery of the topic and his lucid writing style. It’s called The Origin of Wealth and is by Eric D. Beinhocker.

The essential case made in the first part of the book is that classical economics built itself around a mathematical approach that fundamentally mischaracterized the most basic nature of an economic system, then used the wrong sorts of math, and rested all of this upon deeply, provably, and obviously flawed assumptions about human behavior.

The most important insight is that traditional economics presumed and modeled the economy as a closed system. Here’s how Eric put it:

A closed system is any defined set of space, matter, energy or information that we care to draw a box around and study. The universe itself is a system, and within that largest of all systems, one can define any numbers of smaller systems, For example our planet is a system, as is your body, your house or a bathtub full of water. A closed system is a system having no interaction or communication with any other system – no energy, matter, or information flowing into or out of it. The universe itself us a closed system, There is no “outside” the universe, no other system beyond its boundaries that it can interact with.

The problem, of course, is that the economy is very much not a closed system. Without energy, all the money, desire, and human ingenuity in the world won’t make the slightest bit of difference. The economy is quite obviously an open system. Again, here’s Eric:

The second type of system is an open system, with energy and matter flowing into and out of it. Such a system can use the energy and matter flowing through it to temporarily fight entropy and create order, structure, and patterns for a time. Our planet, for example, is an open system; it sits in the middle of a river of energy streaming out from the sun. This flow of energy enables the creation of large, complex molecules which in turn have enabled life, thus creating a biosphere that is teaming with order and complexity.

The importance of this model cannot be overstated. By making the assumption that an economy is a closed system, economists were freed from having to ever account for resource limits – the other two Es. This represents a colossal failure, and much will have to be refashioned in the field of economics for it to be useful in a resource-constrained future. One more quote:

Closed systems always have a predictable end state. Although they might do unpredictable things along the way, they always, eventually, head toward maximum entropy equilibrium. Open systems are much more complicated. Sometimes they can be in a stable, equilibrium-like state, or they can exhibit very complex and unpredictable behavior patterns that are far from equilibrium – patterns such as exponential growth, radical collapse, or oscillations. As long as an open system has free energy, it may be impossible to predict its ultimate end state or whether it will ever reach an end state.

So let's not think of our economy as a collection of numbers and complicated financial products and confusing statistics. Instead, let's think of it as a system that owes its complexity and organization to the constant input of high-quality, useful energy and other resources. If we take away that energy or those resources, we can readily predict that some of the complexity and organization will be lost. Exactly how and where is more difficult to predict, but the general trend of the process towards a loss of complexity is pretty easy to predict.

And here’s the crux of the issue: By ignoring the importance of energy in maintaining the complexity structure of our open-system economy, economists have done far more harm than good. The risk we face, the one that has attracted so many people to the ideas in the Crash Course, is very simply a large and possibly sudden loss of complexity - when, not if, the vast energy subsidy of the past 150 years begins to be withdrawn.

Because our economy is a complex (and not a linear) system, it is virtually impossible to predict how things will unfold in their precise details, but we can describe the basic process. Think of a wave crashing on the beach - we cannot predict every turbulent eddy or tossed bit of foam, but the fact that it will rise, crest, crash, and then retreat is known. Similarly, our economy is propped up by an exponentially increasing flow of energy and resources, like a beautiful and rising wave, and we can readily predict that it will pass a point of maximum height and structure and then devolve chaotically into a much lower and less organized state, unless more and more energy is pumped into it.

Hopefully, we can all appreciate that this is a most (if not the most) crucial turning point in history. We are about to run a very large experiment, where we take the largest and most complex economic system ever devised and starve it of the exponentially increasing flow of energy upon which it was entirely fashioned.

It’s very hard to overstate the significance of this. It will literally touch everything we do.

This is why there’s no “solution” out there. And it the reason why I am continually vexed by the recurring question, “What should we do?” because often it is posed in a way that implies a different question is being asked: "What can we do to maintain everything we currently see around us?” Unless a massive new source of high-quality energy is found, there is almost no chance of maintaining our economy in its present form.

And this is why I claim that the next twenty years will be completely unlike the last twenty years. They don't necessarily have to be terrible, but they certainly won't follow a similar trajectory.

It is critical that we understand that we are not facing a problem, but a predicament. Problems have solutions, while predicaments only have outcomes. You can solve the former but only manage the latter.

Since we have a gigantic predicament on our hands, and we cannot predict how things will evolve or devolve when our economic model is starved for energy, the only rational response is to try to build resilience into our most basic and critical operating systems.

At this point, I simply don’t think there is time to develop new, large understandings and hope they’ll penetrate our major institutions quickly enough. I think triage is called for, and, lacking better information, I would propose that we’d do best by concentrating our efforts on our most basic life support systems, with food, water, sanitation, and energy on the bottom of the ladder, and health care, education, and other basic services on the next rung up.

Conclusion

I started with a few interesting stories about housing and banking to illustrate the degree to which we are still very much in the clutches of the old story. With every passing day, week, and month that we continue to waste valuable time perpetuating the old story, we put ourselves at greater risk of a sudden and shocking crash of our economic system.

Without a functioning economy, all of our technological dreams, hopes, and desires will not come to pass. We will not fetch the last oil from 35,000 feet under the ground, we will not have ceramic batteries in every garage, and we will not seamlessly transition to a new economy. We will have none of that. Instead, we’ll most likely have a steadily worsening economy that sometimes slumps frighteningly, paralyzing our minds and sapping our will.

All of this will happen, unless we develop a different framework for understanding the way the world really works. In my mind, we could do worse than to simply focus on the energy flows, and, while we're building that story, conserve what we use and become careful stewards of what remains.

Energy is everything.

This is why, in my own life, I am focused first and foremost on getting my energy use and flows as redundant, resilient, and as low as I can. I think it’s the right thing for the world, but I also think it’s going to prove to be remarkably good economics for myself as well. We must become the change we wish to see. I figure if I can't change my own life, then there's no point in writing or talking about it as something other people should consider.

When I had the chance at the UK Parliament talk, I gave one “solution” (more of a ‘response’, really, but people like the word solution) – I proposed that we create a national or even international organization to study net energy and energy flows. It should be extremely well-funded and attract our best and brightest, so that we can answer such simple questions as, “Should we retroactively insulate existing structures, or should we build a new light rail system?” Because we only know the economics of that question, we can’t answer the most important question of all: "Which offers the higher energy returned on energy invested?"

I've come away from my UK trip with a vital and fresh perspective on our predicament. I am even more firmly convinced that our best chance at foretelling the future rests with a reasonable understanding of how the economy is organized as a complex system and the role of energy in keeping it that way.

Join the discussion

40 Comments

A paradigm shift to an unprecedented recognition and valuation of the uniqueness of each human being is a feasible way to have even more social complexity than we have had in the fabricated world propped up by fossil fuels and mistaken economics. All of the technology and processing power is in place! Most of what humanity could be has been suppressed for hundreds of years, as people lived and live in awe of the lifeless marvels science shows us we can devise, given sufficient energy.

The stuff is marvelous, but it's no friend of the life of earth, which is far more so. The time has come for the emergence of living marvels. That would be each of us.

I proposed that we create a national or even international organization to study net energy and energy flows.

Fascinating idea Dr. M.

Are you proposing the tracking of energy just within an economy, or would the analysis begin with the net solar gain and then extrapolate energy flows from there?

The total solar energy absorbed by Earth's atmosphere, oceans and land masses is approximately 3,850,000 exajoules (EJ) per year.[11] In 2002, this was more energy in one hour than the world used in one year.[12][13] Photosynthesis captures approximately 3,000 EJ per year in biomass.[14]The amount of solar energy reaching the surface of the planet is so vast that in one year it is about twice as much as will ever be obtained from all of the Earth's non-renewable resources of coal, oil, natural gas, and mined uranium combined.[15]

I've posted on your forum here before about the importance of that text -- it is the foundation of the study of economics, as an effective science -- not the "economics" that is taught in schools today, but REAL economics.

I think as energy prices rise, then the financial ROI will converge with EROEI .. so if we have a period of high (stable) oil prices, we can use financial metrics to make rational choices...

price volatility is the tricky part.. it's much harder to make long term investments (eg light rail) if you don't know whether oil will be $50 or $500 10 years from now... (or whether there will be a $ ! *grin* )

One measure would be a variable tax on non-renewables at source, to set a floor price, and to smooth out the variation..

It's deeply unpopular.. but all taxes are.. and it's regressive... so if you combine it with subsidised energy efficiency measures (cheap insulation, thermostats, subsidised public transport) .. funded by the tax.

This is pretty much UK policy... and much as I hate central planning, I think in this case it's a wise use of it..

So what happened in your talk? Did the Parliamentarians 'get it'? Were they totally gobsmacked and clueless?

I have to figure, having invited you, that they knew 'something' was wrong and they are in search of new ideas if not answers.

May I humbly suggest that in your search for a new way of doing things economically, you give a long, thorough look at The Zeitgeist and Venus Projects. While some of the (still clinging to fairy tales) religionists voice their emotional and nonsensical objections, Peter Joseph already has millions of followers. He's not promoting a utopian ideal, but rather a different way of looking at the planet and it's possibilities, within a resource limited system.

It's obvious what we are doing will not hold for long.

I just this morning received a letter from the US Census Bureau, helpfully informing me that next week, they're going to send me another letter; the census... wonder how much wasted money and paper went to letter me know the obvious. How much more stupid can a government and its functioning be???? This is just one example. It's the definition of insanity, over and over again.

Robert Harrington, author of To Heal the Earth, was a pioneer in this field and is still striving in his home province of British Columbia to create an effective system for, essentially, re-educating humanity in alignment with the story you outline here. In an article written for the Canadian Centre for Policy Alternatives he writes...

...the process we should follow is to carefully study the organization of our planet (ecology) and then transmit proper understanding (education) to those who are responsible for harmoniously blending our lives into the seamless whole pre-organized by the order of the cosmos (economy). Such an understanding would significantly change our behaviour, which currently verges on suicidal brinkmanship.

Education, story management... it begins, well, in the womb. Young people are incredibly receptive to the simple truth evident in the world view of The Crash Course. I hope it is finding its way into the classrooms of our country, and abroad.

We desperately need to start telling ourselves a new story, one that at least fits the known data, and we need to be far more urgent in our preparations for a future that is now upon us. This is not a US or a UK story, but one that applies equally to us all, no matter where we live. It is a global story...

Hi Chris,

Welcome back. Interesting read, thank you, and I certainly agree that it's critical to get the story right and that it's a global story, not just a U.S. centric one.

The tone, however, seems somewhat fatalistic to me in that the talk is still inside of the box where there are no solutions, both in terms of our money system and in terms of our energy needs being met in the future. You have correctly identified the problems of debt backed money and also resource depletion, but there are solutions that appear when one's mind wonders outside of the traditional boxes that we are all being sold. Yes, of course one should be prepared, but humankind depends on us working towards solutions that actually work.

I propose that together we all have far more power to effect positive change than most people realize. While I see the same peak oil conundrum that you do, I also see that the EVERYTHING, and I do mean EVERYTHING, including the "void" of space is comprised of energy. You are energy, I am energy, and there are modern theories that tie energy to all matter and by extension, all energy is also the secret behind the force of gravity. Are there other ways to tap that energy? Of course there are, but those are distant theories that will REMAIN IN THE DISTANCE if our money system is not fixed so that we can advance humankind and get beyond the special interst groups that create the boxes.

This makes fixing our debt backed money system the WORLD's #1 priority. This is exactly what Freedom's Vision does, it is designed for the U.S. specifically but can work in any economy and would, in fact, pressure other countries of the world to adopt the same type of system. It is exactly what accomplishes this:

Wouldn’t it be far better to have an economic model that could operate well, independently of whether it was expanding or even contracting?

Once the money system is returned to a sane and rational mathematical proposition, THEN we can, without special interest influence begin to march humankind forward, not for growth's sake, but for the sake of advancing the survivability and sustainability of everyone, not just you, not just me.

Again, Chris, I implore you to look over Freedom's Vision and let's work towards solutions together. United we stand, divided we fall.

I took a great class for my BA degree which dealt with your first question. It was an environmental philosophy class, and most of it was field trips and discussion. For example, we went to one of the largest coal mines in the US, and down inside, 4 miles underground to the coal face. Anamazing experience. The question posed to us is "what gives us the right to do what we do to the environment." The only answer is "because we can."

What will happen when we have our input of energy cut off? Population reduction through famine and illness. Can we plan ahead for a graceful decline? Doubtful. Another concept similar to closed system is carrying capacity or sustainability. Without fossil energy, what is the carrying capacity for the Earth for Humans. If you look at organism size, it is like a pyramid, with small organisms at the bottom and large ones like whales and elephants at the top. Right now it is a pyramid with a big bulge in the middle - top, where humans are. To make a symmetrical pyramid again, there should be way fewer human beings on the planet. All species populations grow to fill their ecological niche, their habitat. habitat is the geographic area where a species can meet its needs for survival. What humans do is to utilize fossil energy to enlarge our ecological niche. Once that fossil energy is depleted, our habitat will be greatly diminished.

I just this morning received a letter from the US Census Bureau, helpfully informing me that next week, they're going to send me another letter; the census... wonder how much wasted money and paper went to letter me know the obvious. How much more stupid can a government and its functioning be???? This is just one example. It's the definition of insanity, over and over again.

And I suspect that the week after they send you the census form, they will send out another letter telling you what they set you the previous week!

I believe that you are correct that these hard times (harder coming) will cause a wholesale reevaluation of what's important. Since the early Eightees we have self identified as a consumer society. The object was to get yours before someone else got it, and to get more than your neighbor. The rising value of homes caused by the credit bubble made our homes "investments", which were destined to rise to infinity and provide a ready ATM to get money on more credit for more "toys".

Now the idea is being pushed that Green Technology will provide the next economic Boom. This is despite the obsevations that these attempts at creating Green Technologies have not provided any economic benefits. Why? because we still have not figured out that we need to Save before Investing. Like we didn't save for anything in the last 30 years, we are not saving now to employ new "green" technologies. We are building large Solar Installations in the Desert West, California, and Florida (the states with enough sunlight hours to make them viable) without first building the Grid to distribute the power and create economies of scale (savings).

When Debt=Money, then there will be no savings, as rates are kept so low that saving is dicouraged and money flows to the next asset bubble. While the "economists" are looking down the East track for Inflation the deflation train is barreling down on them from the West. "Consumers" are tapped. Their incomes no longer will support any more debt, like our government's income will not support any more debt (every dollar created now takes away 15 cents from the economy). New money goes to pay down debt, not to be saved or invested. Freedom's Vision is the answer to getting ourselves back on the Constitutional economic path that our founders intended. We the people should not pay interest to private bankers for the privledge of them creating our money from debt. Mr. Matenson, I urge you and your readers to aquaint yourselves with Freedom's Vision and join the Swarms. Our Voice will be heard. It's not only about us, but for our children and future generations that may never see the America that we saw.

Strangely optimistic in that article. At this point I would say it's delusional to imagine any government will do whats nessasary to prepare for a different future. Despite all the warnings coming from the peak oil crowd (Heinburg, Simmons,Martenson etc) governments of the world have done everything they can to perpetuate the "more of the same" idea.

The only thing I see happening is governments printing more and more money to increase housing prices, increase consumption, and keep failing institution from failing. It's nice to think that they'll get together and do something more realistic but what basis would anyone have to think that it could happen.

The world must come to realize that wealth is the sum of unconsumed human productivity. It requires work, thought or risk taking. There is no other way to produce it. You can not loan it into existance. You can not create it by government decree. If you take it from the one who produced it and give it to one who is less productive it does not create additional wealth it only accelerates its destruction. The human mind and the human body are capable of producing infinite wealth in an infinite universe. We must first and foremost be free to think, act, succeed or fail as individuals. Then we must be free to organize and do the same with others. The world is trending in exactly the oppisite direction and the concept of wealth is almost completely misunderstood.

I liked your article very much and I am hoping that your trip to the U.K. produces a good harvest

For many years we have as a society over consumed, glutting ourselves with no shame. We have been the biggest and thus the worst consumer society in all of history. It is my observation that everyone in our society is responsible not only for their own actions but also for the deeds of those around us for not advising a more moderate lifestyle. That however is all coming to an end. Hopefully we can have a smooth transition into the next phase of our existence. If not life can and probably be very bad . Our current bankers and leaders as well as those in our recent past share a larger part of the fault and responsibility for the predicament that we are currently in. They led this group of fools right over the cliff for their own personal and corrupt reasons and they are still telling us the same lies as we fall down into the pit.

We desperately need to start telling ourselves a new story, one that at least fits the known data, and we need to be far more urgent in our preparations for a future that is now upon us. This is not a US or a UK story, but one that applies equally to us all, no matter where we live. It is a global story

Yes, we most definitely need a new story. One that not only talks of the restraint of consumption, promotes the research and invention of new forms of fuel, the production of more basic items like food and all the while makes sure that we treat our world in an environmentally friendly way.

We also must first fix our broken financial system that not just encourages over consumption but mandates it if we are to continue and not crash. We are still promoting people to take on more debt in an already debt saturates market. The banks and government want everyone to keep buying products that we have no realistic need for, just to prolong the bubble. And the government is itself spending money like a drunken sailor. The difference is, like when I was in the navy, drunken sailors spend their own money. I have faith in our society when it comes to innovation. We will come up with better mousetraps to fix the problems of so many people vying for our more limited resources. However, if we don't keep our economy running these innovations will ground to a halt. We must fix and reform our great nation and once again be an example for the rest of the world to follow. I am with Nathan Martin and Freedom's Vision. The vehicle that carries this vision, The American Party PAC, must succeed. We have limited time, if we fail I fear that this may be the last battle.

I liked your article very much and I am hoping that your trip to the U.K. produces a good harvest

For many years we have as a society over consumed, glutting ourselves with no shame. We have been the biggest and thus the worst consumer society in all of history. It is my observation that everyone in our society is responsible not only for their own actions but also for the deeds of those around us for not advising a more moderate lifestyle. That however is all coming to an end. Hopefully we can have a smooth transition into the next phase of our existence. If not life can and probably be very bad . Our current bankers and leaders as well as those in our recent past share a larger part of the fault and responsibility for the predicament that we are currently in. They led this group of fools right over the cliff for their own personal and corrupt reasons and they are still telling us the same lies as we fall down into the pit.

We desperately need to start telling ourselves a new story, one that at least fits the known data, and we need to be far more urgent in our preparations for a future that is now upon us. This is not a US or a UK story, but one that applies equally to us all, no matter where we live. It is a global story

Yes, we most definitely need a new story. One that not only talks of the restraint of consumption, promotes the research and invention of new forms of fuel, the production of more basic items like food and all the while makes sure that we treat our world in an environmentally friendly way.

We also must first fix our broken financial system that not just encourages over consumption but mandates it if we are to continue and not crash. We are still promoting people to take on more debt in an already debt saturates market. The banks and government want everyone to keep buying products that we have no realistic need for, just to prolong the bubble. And the government is itself spending money like a drunken sailor. The difference is, like when I was in the navy, drunken sailors spend their own money. I have faith in our society when it comes to innovation. We will come up with better mousetraps to fix the problems of so many people vying for our more limited resources. However, if we don't keep our economy running these innovations will ground to a halt. We must fix and reform our great nation and once again be an example for the rest of the world to follow. I am with Nathan Martin and Freedom's Vision. The vehicle that carries this vision, The American Party PAC, must succeed. We have limited time, if we fail I fear that this may be the last battle.

One major paridigm shift which could address our predicament is for the worlds governments to begin taxing consumption as opposed to the current preference for taxing productivity.

Taxing productivity is part of the problem, as well as taxing savings through the inflation tax. This is probably why we are seeing the decrease of both.

Also, Nate's proposal in Freedom's Vision of eliminating debt-backed money seems like a valid approach to revamping our system from the current ponzi scheme currently being run using Federal Reserve notes.

I have been following the site for several years and have been organizing my friends and nieghbors for the last few months in Shelburne Falls. I'm glad you added this last update, because it was just what I needed to keep reaching out to my friends. I was feeling a bit like the economy was getting a little bit better ,but now I can see that its all about the big picture and energy, and not about this paticilar moment in time.

Any ways I'm so glad that you are thinking about all these issues and that I can relay the info to my friends please keep up the good work so I can support my local communiy and work towards a better future.Your work feels very hopeful to me .

Just out of curiosity, have all the new members, who are here promoting Freedom's Vision, given Chris Martenson the common courtesy of watching the Crash Course in it's entirety? Watching the Crash Course is (as I understand it) a prerequisite for participating here on the blog posts & forums of PeakProsperity.com .

Without a functioning economy, all of our technological dreams, hopes, and desires will not come to pass. We will not fetch the last oil from 35,000 feet under the ground, we will not have ceramic batteries in every garage, and we will not seamlessly transition to a new economy.

Are you suggesting that there is a way to keep our/your economy functioning enough to have all of our technological dreams and hopes, and ceramic batteries in every garage?

This is transcribed directly from pages 60 and 61 of the 'The Transition Handbook', written by Rob Hopkins of the Transition Town Movement in light of its relevants to this thread: -

The Web Of Resilience Excercise

At the begining of any course I teach, and also at events where I need one practical exercise to communicate the Transition concept, I use the following exercise, an adaptation of one I have used for years at the begining of permaculture courses. I have done this with very diverse groups of people and I have never had it not work; it is always very powerful.

Divide students into groups of no more than 15 (minimum of 6, ideal around 12). If you have any more than that divide them into smaller groups. Get them to stand in as tight a circle as they can, so their shoulders are touching.

Equipment Needed

One large ball of string and one sticker per person in each group (these are large parcel labels that you buy on a roll), with the names of different elements of a native woodland written as visibly as possible on these in advance. Here in the UK, my list consists of Oak Tree, Soil, Hedgerow, Badger, Worm, Dormouse, Rainfall, Owl, Leaf Litter, Fox, Robin, Wetland, Hazel, Beetle, Fungi, Blackberries, and so on. You can adapt it for species more appropriate to your area.

Directions

The setting for this exercise is a native woodland (ideally do this exercise outdoors, in a woodland, under a large oak tree, but this is not always possible, especially in an evening class - in this case ask people to imagine themselves in a wood).

The stickers are handed round, everyone sticks theirs to the top of their chest. The ball of string is then passed across and around the circle, the only rule being that as you pass the string to someone you must make clear what your relationship is to them.

As the string is passed around you can chip in any extra inforation you have on woodland ecology that is relevant about relationships between the different elements.

After a while you end up with a complete web of string between everybody. When it is finished, get everyone to pull the web tight, and then to put their hands on top of it and see how strong it is. At this stage people feel quite proud of this web they've created, and are rather proud of themselves.

Once you have the web created you can make the following observations:

"In nature, this web of relationships is inherent in all ecosystems, and it is the diversity of relationships that make these ecosystems work. These webs are very complex and resilient, but they are also very fragile. We intervene in them at our peril, as we can never really know what effects we are having, as we have insufficient understanding of them. While we have just done this exercise about a woodland, we could just as easily do it about a town, with the butcher, the church, the schools, the farmers and so on. Before cheap oil our communities and our economies depended on these networks of relationships and connections. Cheap oil gave us the dubious 'luxury' of thinking we could live without them. People now often live with no idea who lives next-door to them. What life beyond the peak will need, and what permaculture is about, is rebuilding these connections.

"Permaculture is about re-weaving this complex web of beneficial relationships. This game is a useful tool for giving form to what we have thrown away and what cheap oil does to us"

I then walk around the circle and ask them to note how some people are holding more strings than others.

"These are key elements of the ecosystem. When we make interventions in this system we do so at our peril. We could be a farmer who decides to clear the oak trees and drain the wetland. We could be the planners in a town with a strong local economy who decide to permit a large out-of-town supermarket. Either way we often don't see the result's of this intervention immediately.

"What happens when we clear the oaks ( the person who is the oaks lets go of their strings)? We can see that it doesn't make much obvious difference. So then we rain the wetland (wetland person lets theirs go). Again, it looks a bit worse but not much."

Then, using plausible narrative ("so then the farmer did this, and then that ... "), get people to let go of their strings one after the other; at a certain point it all collapses. The point to make is that you have an idea of knowing when that happens.

"You build the out-of-town supermarket and three years ater the high street is deserted. In essence, human beings before cheap oil used good design, and networks of relationships to make things happen. Since cheap oil we have lost all that. We will need to rebuild it."

For added dramatic effect, you can brandish a pair of scissors and cut the strings! As a way of teaching people about permaculture principles and about how cheap oil has transformed our society, this can be a very powerful exercise.

Just out of curiosity, have all the new members, who are here promoting Freedom's Vision, given Chris Martenson the common courtesy of watching the Crash Course in it's entirety? Watching the Crash Course is (as I understand it) a prerequisite for participating here on the blog posts & forums of PeakProsperity.com .

Hello Stephen: I spend a lot of time on a half dozen other fine blogs. While I consider this place "home" I'm amazed what I find on a half dozen others. A lot of folks from this community frequent Nates, and their community does the same here. IMHO I really think partnering on some blogs would be beneficial. I'm not specifically talking about doing or not doing the Swarm. I'm just saying for instance, Gerald Celente mentioned Nate's work on CNBS. I think a few people could be "saved" from CNBS with the CC if CM was - like Karl Derringer - linked from there to here. Just my 2 cents.

That book looks interesting, and I will certainly read it. From your description, it seems to follow a number of the ideas presented in Steve Keen's "Debunking Economics", which was published a few years earlier.

There's some imprecision in some of the terms, though. "Traditional economics" probably means "neoclassical economics", but the history goes back to classical forms beginning with Adam Smith.

A "closed system" is more accurately described as a static model, which does not account for changes over time. This is the neoclassical model that does not reflect reality. An "open system" is one that incorporates dynamic modelling. Austrian, "Post Keynesian" and even Marxism all incorporate some form of dynamic models.

The nice thing about Debunking is that it talks about the history of this subject and compares the various approaches.

Theres a lot more on this at Keen's website for anyone who wants to dig deeper, especially regarding recent financial crisis:

It is important to remember that many have know for years -- at least 40 or so -- that we are headed down a path that has an unappealing destination. If you view the slideshow and are interested in the New Paradigm scenario, let me know.

The article is good, but barely scratches the superficiality of the problem.

We are one world, fully interconnected and the only way forward is by uniting to help each other, not until now that everyone does what you think more.

Chris, the problem of the economy is not the lack of a cheap energy source, because if there also we could not maintain a model of perpetual economic growth. I actually think that soon we will reach a cheap energy source, but will be so cheap that also will destroy the economy of the world.

And the real problem is that we can not join unless it is for a profit, so we'll have to deal with problems as big as war, famine, earthquakes, so we understand that the only option is to join.But it will hit unite for a gain but by the awareness that the welfare of others is the welfare of yourself, love your neighbor as yourself.

The problem is selfishness, no matter the economic model that we think, capitalist, socialist, Marxist, none will work because none is based on love of neighbor as its foundation.

Number 1: Our problems stem from spiritual corruption and wanting something for nothing, which cheap oil has pretty much provided. We have allowed special interests to demonise a perfectly good substitue for crude oil, Hemp oil. Who opposed this? no-one, because we have been too busy enjoying something for nothing. Thats spiritual corruption, and we can change that anytime we like, or shall we keep standing by the punchbowl?

Number 2: Saying human population has to decrease to cope with crude oil declining is an appalling concept. We have to offset the decline of crude with hemp biofuel, and those that are unemployed now (the spare capacity in the system) can be the pioneers of this new economy.But hang on, until we deal with number 1, which means thinking of our children and others in general, it won't happen. Industrial hemp is being permitted in oregon, maine and north dakota so the examples are there.

Number 3: Anyone heard about quantum theory? when you take the time to look at it, you realise that consciousness is actually what creates the universe, and its components. Is consciousness finite? no, therefore, energy cannot be finite, we just need to utilise the next most abundant source - see number 2.

We seem to be waiting for a smack in the face to actually react to this situation, thats fine if you want to experience things that way, but personally, my diagnosis is that this is like watching an alcohollic drinking themselves to death, knowing what they are doing will kill them, but secretly unwilling to accept that deep down, they do not have the courage to face up to the responsibilities of life, which is why they drink. Nature is telling us to change, participation is at your discretion.

Our problem is not "the story." It is the power of the corporate capitalist ruling class.

Beinhocker's book contains a fair amount of useful thoughts, but he radically underestimates the degree to which "markets" are vehicles of elite planning and coercion. Hell, he makes no serious mention of marketing and advertising as forms of behavioral manipulation!

The only way we're going to get a new story is to attack the tellers of the dominant stories. Again, those are the corporate capitalists.

And we don't really believe the Harvard Business School Press is going to publicize that fact, do we?

A fair question Mr. Lark. I think you can that my post and the concepts Mr. Martenson discusses in his crash course are similar . We are discussing a different system, a different way of thinking from the past. Freedom's Vision is a concept that Mr. Martenson may support, and we need his support, as he definitely is an extremely knowledgeable man that can lend both respectability and ideas to a movement that needs to gain a foothold for the good of all of us. I invite you also to go to the Swarm website and check out a real solution to exponential growth.

Our problem is not "the story." It is the power of the corporate capitalist ruling class.

Beinhocker's book contains a fair amount of useful thoughts, but he radically underestimates the degree to which "markets" are vehicles of elite planning and coercion. Hell, he makes no serious mention of marketing and advertising as forms of behavioral manipulation!

The only way we're going to get a new story is to attack the tellers of the dominant stories. Again, those are the corporate capitalists.

And we don't really believe the Harvard Business School Press is going to publicize that fact, do we?

IMO, it makes no sense to attack anybody here, unless they attack first of course... Right now, if everybody just stopped feeding these guys, they would starve. They might retaliate, and it would make sense to defend ourselves, but the real problem is that people do not recognize in the first place how dire the situation is. We simply need to keep telling the truth about what's happening, do what we need to do to insure our own survival, and hopefully more and more will realize it for that it is, the truth. And those who don't, might very well perish, but that's life :(

The problem of 'net energy flows' is that we would quickly realise that the World cannot support both 6.9 billion people AND a natural healthy diverse natural world.

No, we cannot maintain our Western lifestyle. Japan is already bankrupt, USA and several countries in Europe will follow closely as oil prices rise fast, undermining a whole economic model based on cheap energy. For rich countries perhaps there is a partial solution in Transition, a movement trying to prepare local communities for the coming oil shock, that already has 300+ communities around the World but needs to grow faster.

For poor-but-rural countries which have always been self sufficient, nothing much will change except their governments will be bankrupted - perhaps no bad thing in many cases!

But there are inevitable consequences for those populations most vulnerable; poor people living in squatter cities, countries where 50% of the population are under 25, and mega-cities such as Rio de Janiero,and Lagos for example. That's where the descent into chaos will be most dangerous.